Suppose Government Officials Report That the Expected Inflation Rate Is

Multiple Choice

Suppose government officials report that the expected inflation rate is negative. Given this information, you would be able to conclude that:

A) the real interest rate is greater than zero.
B) the real interest rate is less than the nominal interest rate.
C) the real interest rate can be any of the above, depending on the absolute value of the negative expected inflation rate.
D) the real interest rate is negative.
E) the real interest rate is equal to the nominal interest rate.